All Questions

0
votes
0answers
8 views

How to find the tangency portfolio using quadprog in R with different risk free rates

I am trying to find the optimal tangency portfolio for the efficient frontier (calculated using qp.solver in quadprog) but subject to different risk-free rates. Demos for quadprog in R show that to ...
0
votes
1answer
10 views

Face Value of SOFR futures

What is the face value of CME 1M and 3M SOFR future contracts? The face value of CME 3M Eurodollar Futures is 1 million.
2
votes
1answer
20 views

forward + displacement

I I am trying to price a cap/floor using Quantlib in Python. the initial code from from this website: http://gouthamanbalaraman.com/blog/interest-rate-cap-floor-valuation-quantlib-python.html Here is ...
0
votes
2answers
25 views

Is American option price lower than European option price?

I used to think under the same condition, the American option is always more expensive than the European option, because American option can be exercised at any time (has more rights than European ...
3
votes
0answers
14 views

Bounded solution for a SDE

I have this SDE $$ dX(t) = [X(t)(u(t)(\delta-r)+r-\beta(t))+\theta(t)(1-\alpha(t))]dt+X(t)u(t)\sigma dW(t), t \in [0,T] \\ X(0) = X_0(1-\alpha(0)) $$ I've checked some books and I find the solution ...
2
votes
2answers
36 views

Group name for currencies, equities and other financial products

I am working on a financial software system that deals with crypto currencies. This system has a model called 'Currency' that describes for example 'BTC' and market for which there is a 'base' and '...
2
votes
0answers
24 views

Defining an objective function for machine learning task of trading

A simplified example. Given: asset's price time series fixed distances to stop and target. A function of these inputs has two possible output values: $1$ if price is likely to hit the target ...
1
vote
0answers
33 views

Preferred Stock pricing model

I am trying to build a model to price a preferred stock. I want to model the dividends as random payments. I can't find any papers online on the subject. Does anyone have a reference for me?
2
votes
0answers
28 views
2
votes
1answer
40 views

What is the reasoning behind 'terminal time' in market making literature?

Market making literature and models often include a factor for 'terminal time' (1), (2) within which the market maker's inventory is liquidated. What is the reasoning behind this idea? Is it simply ...
3
votes
2answers
37 views

Cash vs Deposit Rates

When constructing a yield curve for derivatives purposes, what is the difference between cash and deposits rates?
2
votes
3answers
68 views

Basic book on stochastic calculus, Itô and jump processes and Brownian Motion

I was looking for a good book that explains at beginner-level the basic of stochastic calculus, probability and random variables, Itô and jump processes as well as Brownian Motion. At university we ...
2
votes
0answers
38 views

Backtesting :: Migration to Simulated / Real-Time Trading

I am relatively new to backtesting and I want to migrate my system to simulated trading via Amibrokers Interactive Broker's API. What I have been doing is setting trade delays such that when a Buy or ...
4
votes
2answers
989 views

How to assess the susceptibility of a U.S. company to go bankrupt?

Suppose a NASDAQ equity XYZ. Question : How can we assess the susceptibility of a company to go bankrupt? Are there good criteria that we can trust? What about ...
-1
votes
0answers
26 views

Put Option Payoff Replication (Dynamic Hedging)

We know that we can use the below equation to replicate the payoff of a call option using stocks and bonds. I am wondering what the equation would look like for a put option instead. In addition, if ...
1
vote
3answers
83 views

PCA for Risk bucketing

I'm working on a project to justify the use the certain tenors (2y, 5y, 10y, 30y) for risk bucketing. I'm a little stuck after calculating the principal components. Just to describe my approach- a) ...
0
votes
0answers
80 views

Is it still worth to be a Quant in 2020? [on hold]

I have been interested in quantitative finance for many years. During the last few years I realized that this profession lost a bit of the "magic". Some of my friends changed the careers from ...
2
votes
0answers
35 views

Estimation of Risk-Neutral Densities Using Positive Convolution Approximation - Python

I'm trying to estimate the risk-neutral density through positive convolution approximation (introduced by Bondarenko 2002: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=375781). I'm currently ...
-2
votes
0answers
16 views

How can I get price data of historical/expired option in Thomson Reuter Eikon?

I want to get price data of historical Dax index historical options in Thomson Reuters; however, I can only get the latest snapshot of the option data, even if I specified the date range Can anyone ...
2
votes
0answers
45 views

Finding the limit $\lim_{n \to \infty} P_0^n$ for a European Cash-or-Nothing put option with $P=K^2\cdot \mathbf{1}_{\{S_T < K\}}$

Exercise : Let $K>0$. A European Cash-or-Nothing put option $P$ has the following pay-out profile : $$P=K^2\cdot \mathbf{1}_{\{S_T < K\}}$$ Let $P_0^n$ be the no-arbitrage value at time $...
0
votes
1answer
25 views

Is there a robust way to calculate stock beta or factor exposure that's specific to crashes?

Commonly known factors like market, value, momentum etc. have positive expected returns because they draw-down unexpectedly and investors require a risk premium for holding them. This idea is extended ...
0
votes
1answer
38 views

What preprint repositories are available online?

Besides data sources, what preprint archives are available for academics and practitioners in the fields of Quantitative Finance and Economics? I have subscribed Google Scholar alerts and regularly ...
1
vote
0answers
37 views

Error in QuantLib-Python when I use function “Bond”

I am using the "Bond" function in QuantLib-Python 1.14. I am planning to use it in this way: ...
1
vote
2answers
90 views

Carry and Rolldown of a Premium bond

I'm hoping that you may help me understand how the pull to par of a premium bond impacts the carry and roll calculations over a year. I understand that carry = Coupon income - cost of funds and that ...
2
votes
1answer
53 views

How to compute cumulative performance of a portfolio with two equities?

I have a time series of adjusted returns for two companies, A and B. I have created a portfolio consisting of these two time series with equal weighting (sum of weights must equal 1): $w_a = w_b=0.5$...
0
votes
0answers
35 views

Greeks Intraday Characteristics and PnL of options

I am modeling intraday and short term options on Futures.Think Monday, wednesday, friday contracts on these tickers: ES, NQ, CL, ZN, ZF, NG. I am wondering about documentation for Intraday greek ...
-1
votes
0answers
39 views

How to calculate implied volatility using Newton-Raphson? [on hold]

I want to calculate monthly implied volatility using Newton-Raphson method which I will describe in the VBA code. I am using at the money call options and a maturity of one month. However, I don't ...
1
vote
0answers
40 views

How to calculate the fair value of a futures roll and what are the practical uses?

Last month, I spent some time calculating the fair value of a futures contract in preparation for the current futures roll period. I've backtested it and noticed that fair roll generally gives me an ...
4
votes
2answers
82 views

Relationship between diversification and standard deviation

Explain the relationship between diversification and standard deviation: There are two general principles that should govern investment behaviors in a world of efficient markets, where one has the ...
0
votes
0answers
51 views

Derivatives question [on hold]

The following is the option prices for call and put options for stock XYZ as of May 4, where the stock XYZ currently trades in the spot market at \$125. ...
1
vote
1answer
44 views

Data Sources for Timestamps of Individual Trades

Are there any data sources where I can get the timestamps of individual trades/transactions? I'd like them to be at the second level or even the millisecond/nanosecond level. Ideally, the trades would ...
2
votes
1answer
104 views

Arbitrage when risk-free portfolio earns less than riskless portfolio

I'm currently reading Paul Wilmott's excellent book on option pricing. Near the beginning, he constructs a risk-free portfolio using an option, and a short on the underlying to hedge the risk. I'm ...
1
vote
1answer
49 views

MLE error in R: initial value in 'vmmin' is not finite

I am trying to fit an ARIMA(1,1)-GARCH(1,1) model. I changed the starting values a lot but still its returning the same error. Below is my code which contains two functions ...
3
votes
3answers
81 views

Any video lecture on copula function, a statistics concept for measuring dependence?

I have read the paper 'Coping with copulas' and it is a bit hard for me to read since it has lots of mathematical equations. So I am looking for any video lecture on this topic, copula function. I ...
2
votes
1answer
44 views

(R-studio) Incorporating overnight returns in high-frequency data

Turning here since I haven't been able to find any help online. I'm currently dealing with a high-frequency data set in R of some stock indicies and I'm currently trying to clean the data so that I ...
-4
votes
0answers
24 views

How to calculate net change from different dates in SQL? [on hold]

In SQL Server, I create a separate/new table of many indicator values for every trading day. I want to calculate the daily net change between them. In other words, a computed column: "net change ...
2
votes
2answers
48 views

How can we compute the daily drop in gross basis?

Background The implied repo rate (IRR) is essentially the carry for going long basis (buying the deliverable bond and selling the futures contract). For this reason, it rises in value day-by-day as ...
2
votes
1answer
72 views

Binomial Tree Option Pricing Model. Lets talk dividends and futures

I am writing an option pricing model for production use. Its not for arb or anything so it doesn't need to be 100% as accurate as possible. Just good enough for "what happens to my book if we jump 10 ...
0
votes
0answers
31 views

Calculating WACC for Google, What should be Market Risk premium

I am at beginner level in Finance. I want to calculate WACC for the Google I am considering risk free rate from treasury reports 30 years data. Not sure about market risk premium. Please guide.
1
vote
1answer
80 views

How to calculate one-year forward one-year rate?

I'm just a little lost on how to calculate forward rates. I know this is an easy question, but, if we are given a one-year and two-year zero rate (let's say, for the sake of the argument, 2% and 3% ...
-4
votes
2answers
74 views

Naked options selling

I sold the naked put. The price of underlying went down and broke the support. The situation changed technically from bullish to bearish. The price of underlying is still quite far above the option ...
1
vote
0answers
21 views

What are industry-standard terms for MBIS “situational bid”?

In the data feed from Municipal Bond Information Services there is a field called "situational bid", which is defined in their reference as "Bids on a security that is being offered for sale." If I ...
2
votes
2answers
45 views

Standardized numerical values for ratings

Is there a standardized way of transforming the ratings of any of the major ratings agencies (S&P, Moody's, Fitch) to a numerical value. Ideally, it might be possible to create a similar scale for ...
2
votes
0answers
49 views

Bid-Ask spread in Roll's model: Negative autocovariance of returns and informational content

Currently studying on techniques to estimate the bid-ask spread. Perhaps the most widely known model is the Roll model (1984). Let $P_t$ indicate log prices $\begin{cases} Bid_t=P_t-c, \\ ...
4
votes
0answers
27 views

Are Fama-Macbeth R-Squared (R2) just assymptotically correct?

I have been doing a research on comparing Fama-MacBeth and panel regression procedures. Think of it as an emerging market case for Petersen (2009) link. My research consists of a route based on full-...
0
votes
0answers
42 views

How to take back-tested code and convert it to forward-testing code? (in Python)

How do you take back-tested code written using the zipline API and convert that into forward-testing code using the IB API (or better yet ib-insync API)? It seems like you would have to completely re-...
6
votes
0answers
69 views

Random variable minus Integral of Ito Generator is a Martingale under what conditions?

I am reading about american option pricing and the variational inequality, and the book I am reading states, in the derivation of the variational inequality, the following is a martingale: $$M_s = U(s,...
1
vote
0answers
52 views

How to check if a portfolio has momentum bias

I am wondering what methodology exists to check if a fund/portfolio is having momentum bias or chasing the past performance, assuming you have their full returns and full portfolio holdings for past ...
0
votes
0answers
33 views

Risk mapping a zero-coupon bond portfolio

I'm trying to understand example 2.6 taken from McNeil and Embrechts "Quantitative Risk Management". The example consists of obtaining the risk mapping of a portfolio of $d$ zero-coupon bonds. The ...
1
vote
0answers
54 views

Is SABR being used in practice for Equity options

Just to be clear: By "in practice" I mean what the banks and other financial companies do. Do financial companies use SABR for pricing equity options? Consider a stock with price $t$ being: $S_t$. ...

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